The benefits of adopting RFID in supply chain planning

Jun 1, 2017 • 3 min

The industry has been talking about RFID for 20 years, but it still hasn’t come into common use or delivered significant value to retailers.

The biggest issue hasn’t been the technology itself, but rather the hype and promise around RFID before it was in the right place to deliver. The price of RFID tags has been an inhibitor to mass adoption, initially costing $10 or more, making them an unrealistic application for a retail operation. Though possible for use on cages or totes in a warehouse, the reading technology was also not particularly advanced, and the Faraday’s Cage effect of racking meant accurately tracking tags was difficult. Indeed, until recently, most RFID readers weren’t highly accurate and offered little advantage over barcode readers, which didn’t carry the same premium price.

So have we reached the time for RFID to come into its own? Getting critical mass is significant, and the most logical starting point for this mass adoption is the high-price, upmarket clothing sector where the price of a tag is less significant and the cost of “shrinkage” is significantly higher. However, the real driver is that as the technology around RFID has improved, the price of tags has begun to fall. Now at less than $1 and dropping fast, they’re quickly becoming a real opportunity for a large market.

The real driver is that as the technology around RFID has improved, the price of tags has begun to fall. Now at less than $1 and dropping fast, they’re quickly becoming a real opportunity for a large market.

In parallel, some innovative companies are changing the capability of the readers and reporting near-perfect accuracy within in certain distances. This is a major step forward and may finally deliver the huge potential that RFID offers.

With the right technology now in place, the question becomes, “Where’s RFID going to deliver the most benefits for the highest ROI?”

There are a number of important areas in retail between security, asset management and supply chain:

Real-time tracking of inventory in the warehouse, in transit and in-store. Reduction in time checking, counting and logging product at all levels of the supply chain will deliver great savings.
Inventory accuracy is even more valuable in an inventory management environment. The ability to accurately know what you have and where will reduce safety stock, enable better timing of replenishment and give better data on where to forecast future demand.
In-store product can be located on the gondolas or on promotional display. This is often difficult for centrally based inventory and operations staff to identify, having a massive impact on the volume sold — and therefore in need of replenishment.
Easy access to fresh category data. In the chilled environment, the ability to not only know what inventory you have on the shelf but also the expiration date and shelf life remaining would revolutionize inventory management in what’s one of the most expensive sectors to operate.

Although some of these applications wouldn’t be the first to materialize, the simple one-way tags are already able to tell retailers what stock is in a location and what direction it’s moving in: into or out of a warehouse, vehicle or store. It then becomes a short step to enable the more complex uses outlined above.

Is it time for RFID to deliver? The retail industry is very close and the benefits are within reach. As the opportunity grows, RFID will gather more momentum to greater adoption and eventually impact all areas of product and retail. Fashion is likely to be the first to benefit, but larger prizes are on offer in the fast-moving and shelf-life impacted food industry. It may be 20 years after the hype started, but within the next couple of years retailers of all types could be seeing an economic business case for making the move to mass RFID adoption.